Rifts plague Libya’s central bank

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Posted – 19th May 2021

Although a new unity government was formed in Libya, ending years of division in state institutions, conflicts still plague some financial institutions that control the country’s economy, namely the central bank.

Some financial and economic institutions in Libya are still experiencing division — namely, the Central Bank of Libya — despite Libya’s newly formed Government of National Unity headed by Prime Minister Abdul Hamid Dbeibeh.

Dbeibeh’s government assumed power on Feb. 5, and a new Presidential Council headed by Mohamed al-Menfi was elected at the Libyan Dialogue Forum, held under the UN auspices in the presence of 73 Libyan figures from various regions.

In this context, Salama al-Ghwail, Libya’s minister of state for economic affairs, told Al-Monitor, “The National Unity Government was established following years of political and administrative division in Libya, and thus unifying economic and financial institutions will have a positive impact.”

He added, “Unifying the ministries of Finance and Economy allowed the government to achieve some progress in a short period of time, and the effects of this process began to appear gradually, notably in preparing a unified budget, planning policy and payroll system.”

Ghwail noted, “The main economic issues we are facing is how to unify revenues and expenditures, as well as how to limit public debt,” as the country’s central bank remains divided. “The new government will also work to solve the unemployment problem, create job opportunities, diversify sources of income and improve revenues in a way that includes the entire country.”

“Security issues are impeding improving trade exchange [within Libya] and unifying the work of banks due to road closures. If security crises are addressed, the liquidity problem will be solved,” he said.

Despite the renewed efforts to reach a solution in Libya, the main coastal road linking the country’s east to the west remains closed as armed groups continue to block the road, thus hindering trade movement across the country.

Although some economic problems were solved once the new government took over, namely the drafting of a unified state budget, the new vice president of the Libyan Presidential Council, Musa al-Koni, said at a May 6 press conference, “A lot has been accomplished in terms of unifying state institutions, but we are [still] awaiting the unification of the financial institution,” in reference to the central bank.

There are still two central banks in Libya: the internationally recognized Central Bank of Libya based in Tripoli and headed by Siddiq al-Kabir, who has held his position for 10 years and is affiliated with the Muslim Brotherhood, and another central bank headed by Ali al-Hibri in eastern Libya.

On May 5, informed sources told Sky News Arabia that “the Muslim Brotherhood in Libya is seeking to disrupt the new appointments in the sovereign positions, as the lists of candidates did not include their previous affiliates, especially for the position of the governor of the central bank.”

On March 24, Sky News Arabia had published an article about Kabir titled “Libya: One official, eight governments,” in which it said, “Despite the many Libyan attempts to dismiss Kabir, none have succeeded given the pressure his supporters and the Brotherhood exerted to keep him in his position, which appears to fund and serve the Brotherhood’s ideological goals.”

The article added, “International forces supporting the Brotherhood (in reference to Turkey) attach great importance to the central bank and Libyan wealth, while at the same time supporting armed militias that control the central bank.”

The Central Bank of Libya plays a major role in the Libyan economy, as it is tasked with managing and issuing banknotes and coins and preserving the Libyan monetary stability domestically and abroad. It is also in charge of managing the state’s gold and foreign currency reserves while monitoring the local banks.

On April 28, the Libyan parliament completed the final lists of candidates for the sovereign positions, on top of which is the position of the central bank governor, whose list did not include Kabir. Parliament submitted the lists to the Supreme Council of State for review before the final voting in parliament. However, on May 1, the Supreme Council of State, headed by Khaled al-Mishri, a former Brotherhood leader, rejected the list of candidates for sovereign positions.

“The central bank will be unified soon; it is an urgent and important step for the Libyan economy,” Ghwail noted.

Speaking about the armed militias’ control of the central bank in Tripoli, he said, “Under the circumstances that the country went through, there were some deficiencies in the work of all institutions, not just the central bank. Perhaps one of the priorities of the legislative, presidential and prime ministerial bodies is to correct deficiencies in all sectors.”

He stressed, “The oil sector is witnessing a significant and clear improvement, and production and export processes are going well, as political and security stability has effectively contributed to that.”

Ghwail explained, “The Ministry of Oil and the National Oil Corporation are working together to develop the sector and achieve the highest rates of efficiency in order to compensate for the periods of shutdown, production halt, and revenue decline.”

In a similar vein, the head of the Liquidity Crisis Committee at the Central Bank of Libya in al-Bayda (the parallel central bank), Ramzi al-Agha, told Al-Monitor, “There is no positive economic impact for unifying governments. The issue of delaying employees’ salaries is ongoing, and the most prominent financial institution, namely the central bank, continues to suffer from division due to Kabir’s 10-year control.”

Public servants in Libya have suffered from a delay in their salaries for years due to the division of financial institutions. The National Commission for Human Rights in Libya had condemned the delay of salaries of public servants, describing the move as a violation of the people’s economic and social rights.

Agha explained, “Unifying the central bank is impeded by Kabir’s influence and the failure to elect a new governor, which is the first step in the process of unifying the central bank.”

“This unification will result in unifying financial data and the balances of commercial banks as well as facilitate the purchase of hard currency,” he said.

“It is crucial to unify the central bank and elect a national figure to manage it so that it can carry out reforms in the exchange rate, eliminate the difference in the exchange rate between the parallel and official market, make foreign currency available to all [regions of the country], and work according to the banking law and not based on the whims of militias,” Agha said.

LIBYA TRIBUNE – George Mikhail

The Libya Consultancy does not imply any association with, nor endorsement by or of the publisher of this article

 
 

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